Types of Companies and their Structure

Business entities can be grouped according to the type of business activity they perform.

1. Service companies perform services for a fee. This group includes companies such as accounting firms, law firms, repair shops, and many others.

2. Merchandising companies purchase goods that are ready for sale and sell them to customers. They include such companies as auto dealer-shops, clothing stores, and supermarkets.

3. Manufacturing companie s buy materials, convert them into products, and then sell the products to the companies or to the final customer. Examples are steel miles, auto manufacturers, and so on.

The size of the company is measured in terms of its assets. Two major categories of assets are current assets and fixed assets. Fixed assets include property, plant and equipment. Current assets generally consist of cash, marketable securities, receivables, inventories and prepayments.

The number of state owned companies as telecommunications, water, and gas has been decreased lately. Companies in the non-governmental sector consist of two basic types: public and private. The difference between public limited and private limited firms, on paper at least, can be found in their names. The word ‘limited’, often shortened to ‘Ltd’ after a company’s name, shows that it is private. On the other hand, the status of a public company is shown by the letters “plc” after its name. This is short for “public limited company. Private company is a limited company that does not issue shares for public subscription. On the contrary, public company is a limited company whose shares may be purchased by the public and traded freely on the open market.

The company is operated by the board of directors. The directors are appointed by the shareholders, normally at the company's annual general meeting (AGM), at which the chairman of the board will be expected to account for their stewardship during the previous year. The company's accounts will be presented to the shareholders at that time so they can judge for themselves whether or not the board has been successful.

The fact that boards of directors tend to meet rather infrequently, say once a week, explains why part-time directors can be elected to the board. Since they do not have departmental responsibilities within the company they are often described as non-executive directors. Some are lawyers, or experts in tax affairs. Some represent influential groups of shareholders. The board of directors of a company is primarily responsible for determining the objectives and policies of a business.

In the long history of management, four major kinds of internal company structure have evolved: line, line-and-staff, functional and matrix. All of these structures are ways of delegating authority and assigning responsibility.

An internal business structure in which every employee is a member of a
direct chain of command from the top executive down through the levels
of management is called a line organization. In this structure, every
person is directly responsible to a single supervisor who is superior in
the organization.

As the complexity and size of the company increase, managers usually find it necessary to modify the line organization by adding staff specialists to handle certain specific duties. Staff specialists perform technical services and provide expert guidance to line managers. This is called line-and-staff organization.

An alternative way to organize a business is to assign managers the responsibility for all activities and decisions in certain defined functional areas of operation. This is called functional organization. This structure, for example, might have five managers who are responsible only for their own departments Production, Marketing, Finance, Research & Development and Personnel.

A fourth kind of organization is used by firms that must manage a number of one-time projects- such as road, dam, or bridge building. These firms use a matrix organization, which allows a project manager to exercise temporary authority over a number of specialists who also must report to different line managers for supervision in their specialties.

Ex. 1. The diagram shows those who control a public limited company. Use the terms in the box to complete it.

1. _________________ (owners of the company)

2. _________________ (responsible to the shareholders)

3. _________________ (appointed by the board to run the company)

Ex. 2. Use the terms in the box to complete the paragraph.

People at the head of an organization are … or senior managers. The … is the person who has overall responsibility for the day-to-day running of an organization. In the case of a limited company the CEO is normally the … of meetings, appointed by the … on the authority of its members. The same person is usually the … of meetings of the …, i.e. the people who are legally responsible for the company. The person responsible for keeping the minutes of board meetings is the....

Ex. 3. Read the information about four companies below and say which matches each of the following terms: a sole trader/sole proprietor; a partnership; a limited company; a plc.

1. Mike Gobb set up an art gallery last year. He owns the gallery and managers it by himself.

2. Craftplay is a medium-sized firm whose shares are available on the stock market.

3. Ovenclean went bankrupt last year, but its shareholders were not made responsible for all the money it owed.

4. Brothers Gianfranco and Giancarlo Belew recently set up an import-export company. They run the business together.

Ex. 4. Comment on.

– the types of companies according to their functions;

– the difference between ltd and plc;

– the activities of the board of directors;

– three major kinds of internal structure.

Text 3

Read the text and do the tasks that follow.